Garanti BBVA General Manager Mahmut Akten said that he does not expect the credit limits for the sector to be lifted within the scope of the inflation fight program over the next year and stated that this is necessary to reduce inflation.
The tight monetary policy implemented by the Central Bank of the Republic of Turkey since June 2023 in its anti-inflation program is supported by additional tightening steps.
Although the capital adequacy and liquidity conditions of the banking sector, which felt the impact of tightening macro conditions and credit restrictions, were sound, pressures on the sector’s funding costs, profitability and asset quality increased in this process.
Within the scope of macroprudential measures, monthly growth limits are applied to loans. 2.5 percent per month for SME loans; 1.5 percent for other TL commercial loans; Just as there are 0.5 percent growth restrictions for foreign currency commercial loans, a two percent monthly growth limit is applied to consumer and vehicle loans on the individual side. If banks increase their loans above these rates, they face additional liabilities.
“I do not expect the limits to be lifted”
Speaking to Reuters, Aksen stated that he expects the credit restrictions to remain throughout the next year and said, “If we are serious about bringing inflation down, I do not expect these limits to come down, or rather to remove the limits. Small conveniences can be provided, ratios can be changed, limits can be changed. This is also the right thing.”
Pointing out that banks can create inflation by giving too many loans, Akten said, “As a banker, it may be wrong to say this, but I think the limits should be changed relatively slowly. Because if you grow suddenly, you cannot solve the inflation problem. We will come to the same place the next year.”
Emphasizing that he expects inflation, which was around 44 percent at the beginning of the year, to end the year at 31-31.5 percent, Akten continued his words as follows: “There is success in this sense. It is not easy to get there. But it should continue to fall permanently in the coming period. If inflation goes with monthly increases of 1.5 percent in the coming period, it will already be in a good place next year. We estimate that it will be around 25 percent at the end of next year, and the interest rate will be 32 percent.”
Stating that the decrease in the policy rate is not directly reflected in loan costs or deposit rates, Akten said: “There is a ratio called TL deposit ratio, which banks try to comply with every four weeks. That is why deposit rates are above the policy rate today. We have seen 60 percent of the 650 sun point decrease (in terms of reflection on costs) in the last three months until last week’s interest rate drop, but we have not seen it all yet.”
Another regulation applied to banks is the 60 percent rate on TL deposits brought to banks to make TL attractive. Banks need to achieve this ratio every four weeks.
Last week, the Central Bank of the Republic of Türkiye cut interest rates by 150 basis points following data showing that the decline in inflation was gaining momentum again. Thus, the bank has cut 800 basis points since July.
Minimum wage increase could be 25 percent
In terms of the course of monetary policy, in addition to inflation, minimum wage negotiations that concern millions of employees are also monitored. Akten noted that they expect the minimum wage increase to be in the range of 25-30 percent.
Stating that although the regulations in the banking sector do not tire the banks as much as they did in the past, they still create stress, Akten said, “The CBRT is more listening and careful; it does not hesitate to make adjustments if necessary every four weeks. It hears us, too, and they hold meetings with all banks from time to time. Is there any stress to maintain the ratio every 4-8 weeks? Yes, it does. But beyond that, it is not that tiring. We would be happier if inflation came down as soon as possible.”
Akten stated that loan growth has remained below inflation for the last 2-3 years, but despite these regulations, loan growth will be above inflation this year and said, “Because there are loans that are not subject to limits. Such as individual credit cards, housing, KMH… Loan growth will be above inflation for the first time in a few years, which has slightly relieved the pressure on us this year.”
Akten added that they expect the balancing trend for the banking sector to continue and said that they foresee TL loan growth to grow balancedly above inflation in 2026. Noting that risk monitoring in asset quality will continue, Akten said, “But there will be more normalization when the interest rate comes down. Net interest margin and capital return will be better.”
Akten stated that they hold an important place in terms of the number of employees and customers at parent partner BBVA, and said, “We are between 25 percent and 30 percent of their general number of customers. We are also the same in customer acquisition. Our number of customers is reaching 30 million by the end of the year.”
Regarding the contribution to the main partner’s profit, Akten stated that the contribution is consolidated with inflation accounting and said, “This is much lower than the profit we declared in Türkiye. We deduct capital as much as inflation. That’s why its contribution is around 7-8 percent. But normally, when inflation reaches below 100 percent and we exit that accounting, we make a profit that can be around 25-30 percent.”
Noting that there is a very competitive environment in Türkiye but the main partner is satisfied with Türkiye, Akten said:
“I think they will always take advantage of opportunities to grow larger, but we ourselves continue to grow with returns above our capital. We invest a lot in technology. We invest 250 million dollars annually in this field, especially in artificial intelligence.”
Source: Reuters
